Case Note

• Citation: (2016) 28 SAcLJ 680
• Published date: 01 December 2016
• Author: LIM Sing Yong LLB (Summa Cum Laude) (Singapore Management University), BCL (Oxon).
• Date: 01 December 2016

LACHES UNLEASHED

How (Not) to Bar a Claim for a Common Account

Chng Weng Wah v Goh Bak Heng

[2016] 2 SLR 464

In Chng Weng Wah v Goh Bak Heng[2016] 2 SLR 464, the defendant trustee successfully relied on laches to bar the plaintiff beneficiary's claim for a common account. Such reliance is problematic. First, since a beneficiary is not obliged to seek a common account within any period of time, any delay should (by itself) not prejudice him in any way. Secondly, barring the common account does not tell the beneficiary what happens to his equitable interest. Thirdly, recourse to laches is unnecessary and potentially confusing since there are straightforward provisions in the Rules of Court that enable a defendant to defeat the claim for an account.

I. Summary of facts

1 Chng Weng Wah v Goh Bak Heng1 (“Chng Weng Wah”) concerned a failed claim for an account. The plaintiff beneficiary, G, brought an action in 2013 against the defendant trustee, C, to seek a common account of certain shares that were held on trust. In 1997, G and C jointly purchased some shares in a Taiwanese company (“MTK”), by contributing equal sums of money. All the MTK shares were subsequently registered under C's name. It was agreed that in 1999, C held approximately 1.1 million MTK shares, half of which were on an oral express trust for G, thereby giving rise to a duty to account for these shares.2

2 Going through the evidence, the Court of Appeal was satisfied that G had instructed C to sell all the shares that G was beneficially entitled to in a series of transactions between 1999 and 2000.3 In other words, the sale proceeds, being the authorised substitute for the MTK shares, subsequently became the subject matter of the oral express trust. On the issue of the sale proceeds, even though the Court of Appeal would have been prepared to find that G had received all the sale proceeds, that is, that C had provided a complete account to G, the Court of Appeal thought that it was unnecessary to make a conclusive finding on this issue given its finding that the doctrine of laches was applicable on the facts.4 The trial judge's finding that the accounts were not settled between C and G therefore stood.

3 The Court of Appeal next proceeded to the issue of laches, noting that between 2002 and 2003, there was correspondence between the solicitors acting for G and C on the status of the MTK shares and the sale proceeds.5 However, no further action was taken by G after 2003, and G commenced his suit only in 2013. The ten-year period was, in the Court of Appeal's view, a rather significant delay by any measure;6 there was a direct causal link between this delay and the prejudice suffered by C in the form of inability to furnish formal documentation. This made G's seeking of the account unconscionable.7 As a result, the Court of Appeal dismissed G's action on the ground that the doctrine of laches applied.

II. Analysis

4 This case note deals with three issues. First, it will be argued that the defence of laches should very rarely, if at all, succeed to bar a claim of this nature, since a beneficiary under a bare trust is generally not under an obligation to call for a conveyance of the trust property to him within any fixed period of time. Without such an obligation there cannot be a “substantial delay” in enforcing the right to a common account during the lifetime of the trust. If this element cannot be satisfied, whether the Court of Appeal was truly applying the doctrine of laches in Chng Weng Wah is open to serious doubt.

5 Secondly, applying laches to bar a claim for a common account raises the question of the status of the beneficiary's equitable interest under the trust. The common account is merely a procedure to ensure

the due administration of a trust. Barring this procedure arguably leaves the underlying right under the trust intact, which makes it uncertain how such a right may be subsequently enforced.

6 Thirdly, it will be suggested that recourse to the equitable doctrine of laches is not necessary in a case of this nature. The court already has a general statutory power under O 43 r 1(4) of the Rules of Court8 to refuse to order a common account, as well as a more specific power under O 43 r 7(1) to refuse to order an account due to undue delay in the prosecution of accounts. Invoking these more straightforward powers would avoid the doctrinal difficulties of applying laches. These three issues will be explored in greater detail below.

A. Was it really laches?

7 The case note will begin by considering the nature of the accounting process. Elliott lamented in his doctoral thesis that the accounting relation in equity “is no longer as well understood as its prevalence and great age warrant”.9 However, the fundamental principles of the accounting process are tolerably clear and were accurately summarised by the Court of Appeal in Chng Weng Wah:10

Where a party has custody of a fund which it is obliged to administer for the benefit of another, such as in the case of a trust, one of the methods by which equity polices the due administration of the funds is by holding the fiduciary to account. The procedure for the accounting of funds may be further broken down into …:

(a) general or common accounts, where no misconduct has been alleged; and

(b) accounts on the footing of wilful default, which involves a breach of duty on the part of the fiduciary. …

The claim for a common account may be divided into … three stages …:

(a) whether the claimant has a right to an account;

(b) the taking of the account; and

(c) any consequential relief. …

In determining whether a claimant has a right to an account, the court has to first ascertain whether the defendant has received property in

circumstances sufficient to import an equitable obligation to handle the property for the benefit of another … The burden is on the claimant to prove this. …

Thereafter, the defendant bears the burden of establishing that it has been released from the duty to account by a settlement. …

8 According to Elliott:11

… [t]he [common] account forms a record of the administration of money and non-monetary assets received in an accountable capacity. The statement of this account tells the [beneficiary], amongst other things, which assets were committed to the fund, what transformations the fund has undergone as investments have been bought and sold, what administrative disbursements have been made, and ultimately how the fund has been distributed.

In short, the taking of a common account reveals to the beneficiary the state of the trust fund, which allows him to police the due administration of the trust.

9 Next, the nature of the trust involved will be considered. The trust in Chng Weng Wah was initially an oral express trust over the MTK shares.12 After the shares were sold, the sale proceeds, being the authorised substitute for the MTK shares, became the subject matter of the same express trust. The trial judge found that this oral express trust was a bare trust, and this finding was not challenged by the trustee on appeal.13

10 A bare trust is a trust where the trustee is simply a repository of the trust property with no active duties to perform.14 The only duty that a bare trustee has to perform is to convey the trust property to the beneficiary upon his request.15 In the recent seminal decision of AIB Group (UK) plc v Mark Redler16 (“AIB v Redler”) by the UK Supreme Court, Lord Toulson distinguished between the range of duties that a trustee may be subject to, such as a custodial stewardship duty,

a management stewardship duty, a duty of undivided loyalty etc, in order to demonstrate that the breach of different types of duties may result in different remedial consequences.17 While some aspects of AIB v Redler have sparked rife academic debate, this particular aspect of AIB v Redler does not seem to be controversial.

11 In the context of a bare trust, it is clear that at the very least, the trustee owes a custodial stewardship duty to the beneficiary, that is, a duty to “preserve the assets of the trust except insofar as the terms of the trust permit the trustee to do otherwise”.18 Therefore, until the trust is brought to an end by the conveyance of the trust property to the beneficiary upon the latter's request, the trustee also comes under a continuous duty to account for the trust property or its lawful substitutes.19 It should also be added that the beneficiary does not have to establish any wrongdoing before he is entitled to ask for a common account.20

12 Moving on to the doctrine of laches, the Court of Appeal in Chng Weng Wah endorsed the following passage in Cytec Industries Pte Ltd v APP Chemicals International (Mau) Ltd,21 which has consistently been approved of in a number of Court of Appeal decisions in Singapore:22

Laches is a doctrine of equity. It is properly invoked where essentially there has been a substantial lapse of time coupled with circumstances where it would be practically unjust to give a remedy either because the party has by his conduct done that which might fairly be regarded as equivalent to a waiver thereof; or, where by his conduct and neglect he had, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him, if the remedy were afterwards to be asserted… [emphasis added]

Apart from the twin requirements of a “substantial lapse of time” and circumstances rendering it “practically unjust to give a remedy”, the Court of Appeal...